JPMorgan Chase's Disturbing Timeline in the Bernie Madoff Case

Bernie Madoff

Yesterday, we learned that JPMorgan Chase (NYSE: JPM  ) was criminally charged by U.S. authorities with two violations of the Bank Secrecy Act in relation to the Bernie Madoff case. Those charges are to be deferred for two years according to the terms of a historic deferred prosecution agreement.

As part of the deal announced yesterday by Preet Bharara, U.S. Attorney for the Southern District of New York, JPMorgan accepted responsibility for its conduct, while also agreeing to pay $1.7 billion to victims of Madoff's fraud. The bank also pledged to continue its reforms of its Bank Secrecy Act compliance program. Separately, JPMorgan also reached agreements in the Madoff case with the U.S. Treasury, the Office of the Comptroller of the Currency, and the Financial Crimes Enforcement Network.

You can read the supporting documents provided by Bharara here (link opens in PDF). I've been following the case for a while now, so I was familiar with most of the evidence. However, the timeline for the final five weeks of Madoff's fraud struck me as particularly troubling. Here it is, as outlined from Bharara's press release yesterday:

  • Oct. 29, 2008: JPMorgan files a report with regulators in the United Kingdom, alerting authorities that Madoff's returns were "probably" "too good to be true." JPMorgan also notified U.K. authorities that it was withdrawing about $300 million of its own money from the Madoff feeder funds. JPMorgan does not alert U.S. authorities, however.
  • Oct. 29, 2008: Madoff's "703 Account" -- a series of checking and brokerage accounts held with JPMorgan -- has a balance of about $3 billion.
  • Oct. 29, 2008 – Dec. 11, 2008: During this period, more than $2 billion exits the 703 account. By the time of Madoff's arrest on Dec. 11, 2008, only about $234 million remained in the 703 Account. Of money that exited the account over this period, about $288 million eventually went to JPMorgan itself to pay for its redemptions from Madoff's feeder funds.

I'd suspect that even the staunchest defenders of JPMorgan would find this timeline a bit curious. I can certainly understand why CEO Jamie Dimon wanted to settle the Madoff case, even if it meant agreeing to a deferred prosecution agreement. There's some conduct that really doesn't stand up very well to scrutiny no matter how many lawyers you hire. 


Read/Post Comments (3) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 08, 2014, at 12:16 PM, SkepikI wrote:

    <I'd suspect that even the staunchest defenders of JPMorgan would find this timeline a bit curious>

    John- I nominate you for understatement of the year!

    A cogent, interesting and mercifully brief article that makes its point without a lot of fluff. I just may have to revise my opinion of BAC as the worst bank in the country and replace it with JPM.

    I still wonder which of JPM's employees and managers are going to join Bernie's vacation club (Jail). Reading the line about deferred prosecution, I think that means..none.

    For you JPM fans, you might just consider the risks associated with hubris....

  • Report this Comment On January 08, 2014, at 4:09 PM, TMFBane wrote:

    Thanks for your comment, Skepikl! It's definitely nip and tuck between BAC and JPM for worst bank in America.



  • Report this Comment On January 09, 2014, at 3:56 PM, tovens wrote:

    Does the CEO of a company take real responsibility or just say, "Oops. So sorry. We'll never do it again"? At 27.5 million dollars a year salary, I think Dimon should show some actual personal responsibility rather than just doing a corporate version of Mea Culpa and letting the shareholders pay. Let's face it, actual people and not the corporation/"person" did the signings and gave the green lights. I'd just as soon see Jamie Dimon and a few others in an orange jumpsuit for a few years.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2787471, ~/Articles/ArticleHandler.aspx, 9/1/2015 4:41:28 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

John Reeves

Editor, Writer, Investor, and Fool.

Today's Market

updated Moments ago Sponsored by:
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASD 4,636.11 -140.40 -2.94%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/1/2015 4:00 PM
JPM $61.45 Down -2.65 -4.13%
JPMorgan Chase & C… CAPS Rating: ****